Despite the underperformance of fixed income we discuss in this Spotlight guide why the value proposition of the asset class hasn't gone away. In particular we review how the RLAM management team use existing, proven funds to actively manage consistent monthly income streams and adapt the portfolio to changing interest rate and credit market factors.

Within this guide, you will find some surprising survey results from FE, a selection of adviser opinions and some Architas views too. We hope this guide will provide you with some food for thought on this burning issue.

Trust restructure plans

By Robert Stock Liquidity problems in some sectors within the smaller companies arena mean that wor...

By Robert Stock

Liquidity problems in some sectors within the smaller companies arena mean that work to restructure the Dresdner RCM's UK Smaller Companies Trust to a more balanced portfolio could take up to three more months.

The re-balancing comes as Dresdner has doubled its annual promotions budget to build retail sales under the leadership of new chief executive Tim Nuding, who took up the role on 1 January, and new head of marketing Nick Smith.

Their arrival has sparked moves to increase broker resources and add to its current regional sales strategy.

Dresdner's new UK smaller companies fund manager Neil Baston, who was head of UK smaller companies at Norwich Union, began to make the move away from the fund's heavy tech, media and telecoms weighting in September last year when he joined Dresdner.

Baston is also reducing the number of holdings from around 110 to between 80 and 100 and reducing the fund's tail because when Baston joined Dresdner 50 holdings made up a total of less than 0.5% of the portfolio.

Baston said: "When I came here we knew that it would take up to six months to restructure the fund because of the marketability issue. We had built up reasonably sized positions in some companies, and given that some areas like technology are out of favour you have to wait for buyers to appear."

That is particularly noticeable in blue-sky internet start-ups that made up around 7% of the portfolio when Baston took over. He has reduced that position to 5% and is aiming to reach a much lower weighting over the next three months, favouring internet infrastructure providers instead.

When he inherited the fund it had a tech-related weighting of 50%, including 30% in software. He is working to reduce that while maintaining an overweight position as technology remains a key long-term play.

Baston, who is a bottom-up stockpicker, is creating a balanced growth portfolio which is roughly split three ways between tech or new economy, growth sectors such as healthcare, leisure and support services, and special situations.

He will be maintaining overweight positions in healthcare and smaller pharmaceuticals, and is working to build out inherited underweight positions in some old economy areas through special situations.

Smith said that under the leadership of Nuding, Dresdner was focusing on building IFA sales and capacity.

The marketing budget has been doubled for this year and Isa advertising will include taxi sponsorship, posters at rail stations, internet, national and trade adverts, as well as a series of IFA roadshows beginning today.

Dresdner, who announced last week that John Tierney of Perpetual is to join its sales team, also has plans to add four more people to its broker support team.

It is a move that will allow it to add a channel overlay to its current regionally-structured sales operation.

During the Isa season it will be promoting its UK range of funds, most noteably Derek Lygo's UK Growth Trust and UK Mid-Cap Trust and Baston's UK Smaller Companies Fund.